Many authors have discussed a decline in internal labor markets and an apparent shift to a new employment contract, characterized by less commitment between employer and employee and more portable skills. These discussions occur without much evidence on what employment contract employees currently feel is fair. We performed quasi-experimental surveys to study when employees in the U.S. and Canada feel that layoffs are fair. Layoffs were perceived as more fair if they were due to lower product demand than if the result of employee suggestions. This result appears to be solely due to norms of reciprocity (companies should not punish employees for their efforts), rather than norms of sharing rents, as new technology was also considered a justification for layoffs. Consistent with theories of distributive and procedural equity, layoffs were perceived as more fair if the CEO voluntarily shared the pain. CEO bonuses due to layoffs lowered their reported fairness only slightly. Respondents in Silicon Valley were not more accepting of layoffs than were those in Canada on average, although the ustifications considered valid differed slightly.

When is employee retaliation acceptable in the workplace? We use a quasi-experimental design to study the acceptability of several forms of retaliatory behavior at work, gathering data in this untested area. Consistent with hypotheses from theories of fairness, we find that employee retaliation in the workplace is perceived to be more acceptable if it is an act of omission instead of an act of commission. We do not find that a more damaging retaliatory act is significantly less acceptable than a less damaging one, suggesting a qualitative rather than a quantitative relationship. We also found individual differences: Respondents who are older, female, politically conservative, and managers typically show less tolerance for retaliation, while union members are a bit more accepting than average.

Many authors have discussed an apparent shift to a new employment contract characterized by less commitment between employer and employee, and closer ties between wages within the enterprise and those in the external labor market. We study the issue of when people in the U.S. and Canada feel pay cuts are fair. In contrast to much previous discussion, we find no evidence of increasing acceptance of pay cuts--a measure of whether external, not internal, labor markets are considered fair. These results suggest that new organizational forms might do well to preserve some features of the “old” employment contract.

Although there is $2 trillion in portfolios using socially responsible investing (SRI) criteria, it remains unclear how to measure “social responsibility.” We explore competing theoretical perspectives that explain the level of convergent and predictive validity across SRI ratings produced by competing social raters. While some prior literature predicts low convergent validity due to desire for differentiation, other work predicts high convergent validity driven by high true validity or by neo-institutionalist forces that reward imitation. We find that these ratings have low correlations and that firms with high and low social ratings are equally likely to be later embroiled in scandals.

Using data from a large U.S. retail employer, we examine how demographic differences between manager and subordinate affect the subordinate’s rate of quits, dismissals, and promotions. We distinguish between two effects that demographic differences can produce: (1) the effects of dissimilarity per se, and (2) the effects of role breaking where the differences violate traditional social roles and status norms (e.g., non-whites managing whites). Our results suggest that both dissimilarity and role breaking can have statistically significant effects. Race: Dismissals and Promotions: Blacks and Hispanics with dissimilar managers are much more likely to be fired, and less likely to be promoted. We interpret these as dissimilarity effects. By contrast, white employees with non-white managers are less likely to be dismissed than whites with white managers, and more likely to be promoted. This suggests role breaking leads non-white managers to defer to white employees. Quits: While dissimilarity surprisingly has no effect on black quit rates, it does cause a moderate increase in Hispanic quits. Racial differences also cause a moderate rise in white quit rates. We expected the effect for whites to be larger because it is the sum of dissimilarity and role-breaking effects. Further analysis suggests the effect for whites is suppressed by pre-hire sorting; whites who dislike having non-white managers tend to avoid working for non-whites in the first place. Age: Age dissimilarity per se does not have effects. However, role breaking does; employees who are at least 20 percent older than their managers are much less likely to be dismissed, and more likely to be promoted. Gender: Gender differences have modest, adverse effects on all three employment outcomes.

JEL classification codes: O16, F23, E32, O12

Abstract:

We investigate whether capital market imperfections constrain investment during an emerging market financial crisis. Both large currency devaluations and widespread collapse of the banking sector characterize recent crises. Although a currency devaluation should increase exporters’ competitiveness and investment, a failing banking system may limit credit to these firms. Foreign-owned firms, which have greater access to overseas financing but otherwise face the same investment prospects, provide an ideal control group for determining the effect of liquidity constraints. We test for liquidity constraints in Indonesia following the 1997 East Asian financial crisis, a period when the issuance of new domestic credit declined rapidly. Exporters’ value added and employment increased after the crisis, suggesting that they profited from the devaluation and had sufficient cash flow to finance more workers. However, only exporters with foreign ownership increased their investment significantly. The failure of domestic firms to invest under profitable conditions suggests that they may have faced liquidity constraints. Investment by foreign-owned firms increased post-crisis capital stock by about 4% more than would have occurred if all the firms were domestically owned.